Friday, January 29, 2010

And the Monkey Got Lucky

The stock market has been rallying over the past 10 months. So, is the stock market performing well? It all depends on how you measure. When measured in US dollars, the Dow currently trades approximately 29% below its all-time record high. However, when measured with that other world currency (gold), the picture is even more bleak. To help illustrate the point, today's chart presents the Dow divided by the price of one ounce of gold. This results in what is referred to as the Dow / gold ratio or the cost of the Dow in ounces of gold. For example, it currently takes 9.3 ounces of gold to “buy the Dow.” This is considerably less that [sic] the 44.8 ounces back in the year 1999. When priced in gold, the US stock market has been in a bear market for the entire 21st century.

Next, we have today's "unexpected" announcement that 4th quarter GDP was a whopping 5.7 percent, a full percentage point above "Consensus" expectations of 4.7 percent. As with the last three quarterly reportings, we can expect the first revision of that number to knock it down a bit and then the final revision to bring it closer to or even lower than Consensus, if the behavior of the Data Moles at Commerce over the last year is any indication. According to Commerce,

"The acceleration in real GDP in the fourth quarter primarily reflected an acceleration in private inventory investment, a deceleration in imports, and an upturn in nonresidential fixed investment that were partly offset by decelerations in federal government spending and in [Personal Consumption Expenditures] PCE."

Oh, excellent, so we can expect some good news regarding that lagging indicator we call employment.

Hiring rates remain very low, and CBO projects that the unemployment rate will average more than 10 percent during the first half of 2010, before beginning a gradual decline. That pattern is typical of recent recessions, where hiring continues to fall for 6 to 12 months after the economy begins to grow.

SBD is tempted to link to a number of other sucky indicators regarding the economy, the stock market, employment or lack thereof, finance, and investing, but he really doesn't understand any of it and suspects that neither do you. It's better to live in fear and alternately hoard gold and cash and spend like a trailer trash Lotto winner than delude oneself into thinking all these signals can be interpreted into anything resembling a plan that Dave Ramsey wouldn't tweet a small fart to if you called into his show.

More interestingly, and perhaps a better indicator of how to navigate the turbulant waters of this economy, other than getting a job with the government, news comes from the Anglosphere regarding another clown show:

Lusha the Chimpanzee Outperforms 94% of Russia Bankers with Her Investment PortfolioBy Will Stewart

A chimpanzee in Russia has out-performed 94 per cent of the country's investment funds with her portfolio growing by three times in the last year. Moscow TV reported how circus chimp Lusha chose eight companies from a possible 30 to invest her one million roubles - around £21,000. 'She bought successfully and her portfolio grew almost three times. She did better than almost the whole of the rest of the market,' said editor of Russian Finance magazine Oleg Anisimov.

[...]

And her trainer Svetlana Maksimova admitted: 'Money questions should be decided by financiers and politicians. If monkeys get into it, our economy will collapse at once.'

But Pavel Trunin, the head of monetary policy department at the Institute for the Economy in Transition in Moscow, said enviously: 'It shows that financial knowledge does not play a great role in giving forecasts to how the market will change.It is usually a matter of more or less successful guessing. And the monkey got lucky.'

Ms. Lusha, in a similar predicament to the idiot savant English singing sensation and Monster Susan Boyle upon worldwide recognition of her talents, remains without a fashion and hair waxing consultant.SBD believes that with a bit of grooming, Lusha could easily replace CNBC's Rebecca Quick and become the new decade's "Money Honey." SBD, himself a hideous chimp, will be watching this gal closely.